Despite the Chancellor’s Budget promising 12 new investment zones to help kickstart the UK economy, more than a quarter of a million UK SMEs are still teetering on the edge.
They are being pushed to the brink by the toxic combination of the pandemic and cost-of-living crisis.
A staggering 5 percent of UK SMEs – equivalent to 275k businesses – fear they will have no choice but to wind up their businesses due to widespread economic volatility this year.
New research from solution-led fintech provider, Nucleus Commercial Finance highlights the scale of the challenge facing businesses up and down the country.
On average, UK SMEs have seen their business costs rise by 15 percent in the past 12 months, with a similar rise expected over the coming year as well.
The picture looks even more worrying for small and medium-sized businesses specifically – those with 10 to 249 employees. Among this group, costs have risen on average more than 18 percent. Crucially, when looking to the year ahead, 83 percent of businesses say that costs have risen and are expected to rise further.
How are businesses combatting this issue?
However, businesses are looking to mitigate the situation in a variety of ways. More than a third (35%) of SMEs are increasing the cost of products and services to help cope. Around a quarter (23%) are delaying planned investment in tech/ infrastructure, while 16 percent are shelving their growth ambitions.
The findings also shine a spotlight on the extent to which increased costs will pass onto employees up and down the country. The data shows that 14 percent of UK SMEs say they have delayed planned investment in staff training and development, 13 percent are asking employees to work more from home, and the same amount are reducing staff hours.
It was also found that 12 percent are reducing staff numbers, 11 percent are instigating a promotion/ hiring freeze, 9 percent are reducing staff perks, and 5 percent are reducing their contribution to employee pensions.
Chirag Shah, CEO and Founder of Nucleus Commercial Finance commented:
“While the Chancellor’s Budget and recommitment to the creation of 12 new entrepreneurial zones signalled a clear route to kickstart the economy and revitalise investment in the UK; SMEs and their employees are still at high risk this year.
“Going forward, the government needs to give businesses the confidence that their commitment and drive for growth will be properly supported, combined with substantive incentives for them to take a financial leap. So, while the Chancellor’s inclusion of a new tax credit for SMEs who spend at least 40 percent of their expenditure on Research & Development may be a welcomed bonus; business owners will still be laser-focused on exactly how the energy cost freezes will prevent them from having to turn the lights out forever.”
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
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